Fenwick & West Agrees to $54M Settlement Over Alleged Role in FTX Fraud Case

TL;DR

• FTX's former law firm and auditor agree to pay $66 million to settle customer claims over fraud.

• Fenwick denied wrongdoing and still faces a separate $525 million suit in Washington that is not resolved by Friday’s deal.

Silicon Valley law firm Fenwick & West has agreed to pay $54 million to settle claims that it helped facilitate the collapse of cryptocurrency exchange FTX, according to a federal court filing submitted Friday in Miami.

The settlement stems from a second wave of class-action agreements in the long-running FTX litigation overseen by U.S. District Judge K. Michael Moore. Alongside Fenwick & West, auditor Prager Metis agreed to pay $11.75 million, while former NBA player Udonis Haslem will contribute $420,000 over allegations tied to promotional activity for the exchange.

Lawyers Allege Legal Firm Enabled Fraud

Attorneys representing FTX customers argued in court filings that Fenwick & West “helped to craft and implement strategies that facilitated FTX’s fraud.”

The firm strongly rejected the allegations, telling Reuters that it “was not aware of the fraud at FTX,” and maintains that it “stands by the integrity of its legal work” while disputing any wrongdoing.

The settlement is part of a broader expansion of FTX-related class-action resolutions that have been filed in phases since late 2024. Earlier agreements covered 15 defendants, including former executives and high-profile promoters connected to the exchange.

Those earlier settlements included FTX founder Sam Bankman-Fried, former Alameda Research CEO Caroline Ellison, and multiple celebrity endorsers who promoted the exchange during its rise.

The plaintiffs’ legal team is seeking certification of a broad class that could include anyone who held assets on FTX, participated in yield products, or purchased the FTT token.

They estimate the group could number in the millions, citing FTX’s reported user base of more than 1.2 million accounts at its peak.

Attorneys Adam Moskowitz and David Boies are also requesting that the FTX bankruptcy estate be replaced as the administrator of settlement payouts, proposing instead that JND Legal Administration handle distributions for efficiency and cost reasons.

The proposed compensation model would offset customer losses by subtracting amounts already recovered through the FTX bankruptcy process. Crypto holdings would be valued based on CoinGecko pricing as of May 14, while FTT tokens would be valued only at documented purchase prices, with free distributions treated as valueless.

Ongoing Legal Disputes Continue

Not all affected investors support the settlement framework. A group of plaintiffs from Hong Kong, Singapore, the UK, the EU, and South Korea—claiming more than $500 million in losses—has asked the court to pause broader rulings that might affect their separate case.

Meanwhile, Fenwick & West still faces a separate $525 million civil lawsuit in Washington, D.C., brought by FTX victims alleging malpractice, fraud, and gross negligence. That case remains unresolved despite the Miami settlement.

The Fenwick deal also contrasts with earlier litigation involving former FTX bankruptcy counsel Sullivan & Cromwell, which was dropped after a court-appointed examiner concluded the firm was not complicit in the exchange’s fraud.

The settlement comes more than three years after FTX collapsed in November 2022, triggering one of the largest financial fraud cases in crypto history.

Bankman-Fried was later convicted of stealing approximately $8 billion in customer funds and is currently serving a 25-year prison sentence while appealing the verdict. The FTX bankruptcy estate has since recovered more than $5 billion and continues efforts to reimburse creditors, with many customers expected to recover a substantial portion of their losses.

Judge Moore must still grant preliminary approval before the settlement becomes effective, with a final approval hearing expected roughly 90 days later if approved.

Meanwhile, former Alameda and FTX executive Caroline Ellison has been released from federal custody after serving 14 months of her 2-year prison term.